Asahi offers to by Peroni and Grolsch for EUR 2.6 billion

ThaiBev’s aggressive posturing did its trick: it separated the serious bidders for SABMiller’s brands Peroni and Grolsch from the ditherers.

On 10 February 2016 AB-InBev said that it has received a binding EUR 2.55 billion (USD 2.9 billion) offer from Japan’s Asahi. The two have now entered into a period of exclusivity to finalise a deal, which also includes London’s Meantime brewery and a UK distribution subsidiary of SABMiller called Miller Brands.

Asahi’s bid stopped its rivals, including Thai Beverage, the maker of Chang beer, and a handful of private equity buyers in their tracks.

If completed, the deal would be Asahi’s biggest acquisition and the largest Japanese deal in the alcohol industry since Suntory’s USD 16 billion takeover of U.S. spirits company Beam in 2014.

Commentators say the deal is only justifiable under the demographic logic of Asahi’s shrinking home country. The bid values the SABMiller assets at about 15 times profits (EBITDA), which insiders think is within the medium price range.

However, if you use a different metric like EBIT, the deal looks seriously expensive as Asahi will pay an estimated 50 times EBIT for the businesses. Not to forget, since Asahi only has a tiny foothold in Europe, the opportunities to wring out cost savings will be limited.

SABMiller acquired 60 percent of Italy’s brewer Peroni in 2003 for about EUR 563 million and raised its stake to 99.8 percent in 2005. Its acquisition of Dutch-based lager brand Grolsch was made in 2007 for EUR 816 million. The craft brewer Meantime has been in the SABMiller stable for only nine months.

Like other Japanese brewers, Asahi is faced with a declining domestic market. Its previous deals focused on other parts of Asia. The group owns 20 percent of China’s Tsingtao Brewery and it paid USD 1.3 billion in 2011 for New Zealand’s Independent Liquor.

The Peroni/Grolsch deal will give Asahi a long-coveted foothold in Europe. It would add about USD 783 million in combined revenue, which would boost Asahi’s overseas sales ratio to 18 percent from its current 14 percent, Asahi said.

As with AB-InBev’s sale of SABMiller’s stake in MillerCoors to Molson Coors, this deal is conditional on the completion of AB-InBev’s takeover of SABMiller.